December 15th, 2015

Gold, bitcoin fail to protect investors against Thursday's stock market meltdown

NYSE traderDrew Angerer/Getty Images

Summary List Placement
  • Despite Thursday's stock market plunge, traditional and non-traditional hedges like gold and bitcoin were not immune from the sell-off.
  • Technology stocks led a steep sell-off in the market, with the Nasdaq 100 index down as much as 5.5% in Thursday afternoon trades.
  • Gold traded down as much as 1%, while bitcoin fell 6% on Thursday. Typically, investors look to these non-traditional assets to provide protection during stock market sell-offs.
  • Visit Business Insider's homepage for more stories.

Thursday's steep stock market sell-off spared few asset classes that are traditionally viewed as an equity hedge.

Technology stocks led the market decline, with the Nasdaq 100 index down as much as 6%. Mega-cap tech winners like Apple, Microsoft, and Amazon fell 8%, 7%, and 6% respectively.

Meanwhile, the S&P 500 fell as much as 4%, while the Dow Jones industrial average fell more than 1,000 points for a loss of 3%.

The steep technology-driven sell-off in the stock market spread to traditional and non-traditional portfolio hedges like gold and bitcoin.

Gold fell as much as 1% to $1,927.20 per ounce in Thursday trades, while bitcoin fell as much as 6% to $10,455.

Both gold and bitcoin have recently been bid up by investors worried about the expanding balance sheet of the US Fed and its recent policy overhaul that will likely lead to higher levels of inflation.

Read more: 'I had run $5,000 up to $140,000 in just 2 years': Here are the 7 trading rules stock-market wizard Marty Schwartz leverages to help ensure success

Last month, gold touched all-time highs at $2,089 an ounce, while bitcoin hit a multi-year high of $12,473.

Investors often look to both gold and bitcoin as a hedge to inflation, deflation, and falling stock prices due to their historically low correlation to equities.

But that historical correlation didn't play out on Thursday.

One traditional asset class that did provide protection to investors from Thursday's market sell-off was bonds. The Bloomberg Barclay's US Aggregate Bond Index traded up as much as 0.20%.

For all the talk among Wall Street analysts that the popular 60-40 investment portfolio that balances stocks and bonds is "dead," it's alive and well today.

Read more: You can make 5, 10, 50x your money': Here's an inside look at the 7-part strategy small-stock expert Ian Cassel is using to unearth the market's most overlooked gems

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